Illumina, Inc. (NASDAQ:ILMN) today announced its financial
results for the second quarter of fiscal year 2015.
Second quarter 2015 results:
- Revenue of $539 million, a 21% increase
compared to $448 million in the second quarter of 2014, and an
increase of 25% on a constant currency basis
- GAAP net income for the quarter of $102
million, or $0.69 per diluted share, compared to $47 million, or
$0.31 per diluted share, for the second quarter of 2014
- Non-GAAP net income for the quarter of
$120 million, or $0.80 per diluted share, compared to $85 million,
or $0.57 per diluted share, for the second quarter of 2014 (see the
table entitled “Itemized Reconciliation Between GAAP and Non-GAAP
Net Income” for a reconciliation of these GAAP and non-GAAP
financial measures)
- Cash flow from operations of $171
million and free cash flow of $130 million for the quarter
Gross margin in the second quarter of 2015 was 69.8% compared to
67.1% in the prior year period. Excluding the effect of non-cash
stock compensation expense, amortization of acquired intangible
assets, and legal contingencies, non-GAAP gross margin was 72.4%
for the second quarter of 2015 compared to 70.9% in the prior year
period.
Research and development (R&D) expenses for the second
quarter of 2015 were $96.2 million compared to $83.0 million in the
prior year period. R&D expenses included $10.7 million and
$12.8 million of non-cash stock compensation expense in the second
quarters of 2015 and 2014, respectively. Excluding these charges
and contingent compensation, R&D expenses as a percentage of
revenue were 15.8% compared to 15.6% in the prior year period.
Selling, general and administrative (SG&A) expenses for the
second quarter of 2015 were $124.4 million compared to $114.6
million in the prior year period. SG&A expenses included $19.6
million and $20.8 million of non-cash stock compensation expense in
the second quarters of 2015 and 2014, respectively. Excluding these
charges and amortization of acquired intangible assets, SG&A
expenses as a percentage of revenue were 19.2% compared to 20.5% in
the prior year period.
Depreciation and amortization expenses were $30.7 million and
capital expenditures were $41.4 million during the second quarter
of 2015. The Company ended the quarter with $1.51 billion in cash,
cash equivalents and short-term investments, compared to $1.34
billion as of December 28, 2014.
“We delivered solid financial results in the second quarter with
increasing demand for our new products,” stated Jay Flatley, CEO.
“The fundamentals of our business are strong and we remain focused
on innovation and market expansion.”
Updates since our last earnings release:
- Announced an agreement with Annoroad to
jointly develop advanced clinical applications for non-invasive
prenatal testing in China based on our next-generation sequencing
technology
- Launched Illumina SeqLab for
large-scale human whole genome sequencing operations, an integrated
solution for customers with HiSeq X™ systems
- Published a preliminary study in The
Journal of the American Medical Association which retrospectively
correlated 10 cases of occult maternal cancer among pregnant women
receiving an “aneuploidy detected” or “aneuploidy suspected”
positive results on the verifi® noninvasive Prenatal Test
(NIPT)
- Entered into a collaboration with Merck
KGaA and Genea to advance excellence in fertility technologies and
processes within the assisted reproductive treatment (ART)
laboratory
- Further
strengthened Illumina's management team by appointing
Sanjay Chikarmane as Senior Vice President and General Manager of
the Enterprise Informatics business unit
Financial outlook and guidance
The non-GAAP financial guidance discussed below reflects certain
pro forma adjustments to assist in analyzing and assessing our core
operational performance. Please see our Reconciliation of Non-GAAP
Financial Guidance included in this release for a reconciliation of
the GAAP and non-GAAP financial measures.
For fiscal 2015, the Company continues to project
approximately 20% total revenue growth, including a 3%
negative impact from foreign exchange assuming current currency
exchange rates. The Company has increased its projections for
non-GAAP earnings per diluted share
to $3.39 to $3.45.
Quarterly conference call information
The conference call will begin at 2:00 pm Pacific Time (5:00 pm
Eastern Time) on Tuesday, July 21, 2015. Interested parties may
listen to the call by dialing 877.703.6110 (passcode: 79927332), or
if outside North America by dialing 1.857.244.7309 (passcode:
79927332). Individuals may access the live teleconference in the
Investor Relations section of Illumina’s web site under the
“Company” tab at www.illumina.com.
A replay of the conference call will be available from 6:00 pm
Pacific Time (9:00 pm Eastern Time) on July 21, 2015 through July
28, 2015 by dialing 888.286.8010 (passcode: 76382666), or if
outside North America by dialing 1.617.801.6888 (passcode:
76382666).
Statement regarding use of non-GAAP financial
measures
The Company reports non-GAAP results for diluted net income per
share, net income, gross margins, operating expenses, operating
margins, other income, and free cash flow in addition to, and not
as a substitute for, or superior to, financial measures calculated
in accordance with GAAP.
The Company’s financial measures under GAAP include substantial
charges such as stock compensation expense, amortization of
acquired intangible assets, non-cash interest expense associated
with the Company’s convertible debt instruments that may be settled
in cash, and others that are listed in the itemized reconciliations
between GAAP and non-GAAP financial measures included in this press
release. Management believes that presentation of operating results
that excludes these items provides useful supplemental information
to investors and facilitates the analysis of the Company’s core
operating results and comparison of operating results across
reporting periods. Management also believes that this supplemental
non-GAAP information is therefore useful to investors in analyzing
and assessing the Company’s past and future operating
performance.
The Company encourages investors to carefully consider its
results under GAAP, as well as its supplemental non-GAAP
information and the reconciliation between these presentations, to
more fully understand its business. Reconciliations between GAAP
and non-GAAP results are presented in the tables of this
release.
Use of forward-looking statements
This release contains projections, information about our
financial outlook, earnings guidance, and other forward-looking
statements that involve risks and uncertainties. These
forward-looking statements are based on our expectations as of the
date of this release and may differ materially from actual future
events or results. Among the important factors that could cause
actual results to differ materially from those in any
forward-looking statements are (i) our ability to further develop
and commercialize our instruments and consumables and to deploy new
products, services, and applications, and expand the markets, for
our technology platforms; (ii) our ability to manufacture robust
instrumentation and consumables; (iii) our ability to successfully
identify and integrate acquired technologies, products, or
businesses; (iv) our expectations and beliefs regarding future
conduct and growth of the business and the markets in which we
operate; (v) challenges inherent in developing, manufacturing, and
launching new products and services; and (vi) our ability to
maintain our revenue levels and profitability during periods of
research funding reduction or uncertainty and adverse economic and
business conditions, together with other factors detailed in our
filings with the Securities and Exchange Commission, including our
most recent filings on Forms 10-K and 10-Q, or in information
disclosed in public conference calls, the date and time of which
are released beforehand. We undertake no obligation, and do not
intend, to update these forward-looking statements, to review or
confirm analysts’ expectations, or to provide interim reports or
updates on the progress of the current quarter.
About Illumina
Illumina is improving human health by unlocking the power of the
genome. Our focus on innovation has established us as the global
leader in DNA sequencing and array-based technologies, serving
customers in the research, clinical and applied markets. Our
products are used for applications in the life sciences, oncology,
reproductive health, agriculture and other emerging segments. To
learn more, visit www.illumina.com and follow
@illumina.
Illumina, Inc. Condensed Consolidated Balance
Sheets (In thousands) June 28,
2015 December 28, 2014 ASSETS
(unaudited) Current assets: Cash and cash equivalents $
591,057 $ 636,154 Short-term investments 919,325
702,217 Accounts receivable, net 368,611 289,458 Inventory 223,620
191,144 Deferred tax assets, current portion 51,676 40,786 Prepaid
expenses and other current assets 83,402 29,844 Total
current assets 2,237,691 1,889,603 Property and equipment, net
302,840 265,264 Goodwill 724,904 724,904 Intangible assets, net
288,177 314,500 Deferred tax assets, long-term portion 66,723
49,848 Other assets 82,790 95,521 Total assets $
3,703,125 $ 3,339,640
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $
107,884 $ 82,626 Accrued liabilities 314,722 335,276 Long-term
debt, current portion 302,447 304,256 Total current
liabilities 725,053 722,158 Long-term debt 1,000,829 986,780 Other
long-term liabilities 183,331 167,904 Stockholders’ equity
1,793,912 1,462,798 Total liabilities and stockholders’
equity $ 3,703,125 $ 3,339,640
Illumina, Inc. Condensed Consolidated Statements of
Income (In thousands, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended June 28,
2015 June 29, 2014 June 28, 2015
June 29, 2014 Revenue: Product revenue $ 462,760 $
390,808 $ 921,887 $ 753,019 Service and other revenue 76,618
56,760 156,056 115,330 Total revenue 539,378
447,568 1,077,943 868,349 Cost of
revenue: Cost of product revenue
(a) 119,459 114,307 239,083
225,748 Cost of service and other revenue
(a) 32,170 23,176
64,699 44,689 Amortization of acquired intangible assets 11,384
9,545 22,769 19,080 Total cost of
revenue 163,013 147,028 326,551 289,517
Gross profit 376,365 300,540 751,392 578,832
Operating expense: Research and development
(a)
96,182 82,985 187,954 160,026 Selling, general and administrative
(a) 124,441 114,649 240,758 224,222 Acquisition related
expense (gain), net 2,329 (225 ) (7,558 ) (1,238 ) Headquarter
relocation 1,480 2,892 2,179 3,487
Total operating expense 224,432 200,301 423,333
386,497 Income from operations 151,933 100,239
328,059 192,335 Other expense, net (10,761 ) (39,773 ) (8,841 )
(48,081 ) Income before income taxes 141,172 60,466 319,218 144,254
Provision for income taxes 38,925 13,861 80,313
37,672 Net income $ 102,247 $ 46,605 $
238,905 $ 106,582 Net income per basic share $ 0.71
$ 0.36 $ 1.66 $ 0.82 Net income per
diluted share $ 0.69 $ 0.31 $ 1.61 $ 0.71
Shares used in calculating basic net income per share
144,220 130,583 143,996 129,365 Shares
used in calculating diluted net income per share 148,969
149,121 148,826 149,870
(a) Includes total stock-based compensation expense for
stock-based awards:
Three Months Ended Six Months
Ended June 28, 2015 June 29, 2014
June 28, 2015 June 29, 2014 Cost of
product revenue $ 2,113 $ 2,149 $ 4,445 $ 4,244 Cost of service and
other revenue 466 284 745 569 Research and development 10,747
12,785 22,054 24,454 Selling, general and administrative 19,631
20,778 37,631 40,153 Stock-based
compensation expense before taxes $ 32,957 $ 35,996 $
64,875 $ 69,420
Illumina, Inc.
Condensed Consolidated Statements of Cash Flows (In
thousands) (unaudited)
Three Months Ended Six Months Ended June 28,
2015 June 29, 2014 June 28, 2015
June 29, 2014 Net cash provided by operating
activities
(a) $ 171,445 $ 178,030 $ 238,224 $ 215,117 Net
cash (used in) provided by investing activities (142,470 ) 114,777
(296,617 ) (29,610 ) Net cash provided by (used in) financing
activities
(a) 27,810 (136,521 ) 15,276 (222,445 ) Effect of
exchange rate changes on cash and cash equivalents 735 422
(1,980 ) 522 Net increase (decrease) in cash and cash
equivalents 57,520 156,708 (45,097 ) (36,416 ) Cash and cash
equivalents, beginning of period 533,537 518,513
636,154 711,637 Cash and cash equivalents, end of
period $ 591,057 $ 675,221 $ 591,057 $ 675,221
Calculation of free cash flow: Net cash provided by
operating activities
(a) $ 171,445 $ 178,030 $ 238,224 $
215,117 Purchases of property and equipment (41,351 ) (23,324 )
(77,902 ) (42,336 ) Free cash flow
(b) $ 130,094 $
154,706 $ 160,322 $ 172,781
______________________________________________________________________________________________________
(a) Net cash provided by operating activities excludes
excess tax benefit related to stock-based compensation of $106.2
million in the first half of 2015, of which $29.8 million was
recorded in Q2, and $77.3 million in the first half of 2014, of
which $26.8 million was recorded in Q2. Net cash used in financing
activities reflects the excess tax benefit as a corresponding
in-flow in the respective periods.
(b) Free cash flow, which is a non-GAAP financial
measure, is calculated as net cash provided by operating activities
reduced by purchases of property and equipment. Free cash flow is
useful to management as it is one of the metrics used to evaluate
our performance and to compare us with other companies in our
industry. However, our calculation of free cash flow may not be
comparable to similar measures used by other companies.
Illumina, Inc. Results of Operations -
Non-GAAP (In thousands, except per share amounts)
(unaudited) ITEMIZED RECONCILIATION BETWEEN
GAAP AND NON-GAAP NET INCOME PER SHARE: Three
Months Ended Six Months Ended June 28,
2015
June 29, 2014
June 28, 2015 June 29, 2014 GAAP net
income per share – diluted $ 0.69 $
0.31 $ 1.61 $ 0.71 Adjustments
to net income: Amortization of acquired intangible assets 0.08 0.08
0.17 0.17 Non-cash interest expense
(a) 0.07 0.06 0.14 0.12
Acquisition related expense (gain), net
(b) 0.02 — (0.05 )
(0.01 ) Headquarter relocation 0.01 0.02 0.01 0.02 Loss on
extinguishment of debt — 0.21 — 0.21 Legal contingencies — 0.03 —
0.07 Contingent compensation expense
(c) — — — 0.02
Cost-method investment gain, net
(d) — — (0.09 ) —
Incremental non-GAAP tax expense
(e) (0.07 ) (0.14 ) (0.08 )
(0.21 ) Non-GAAP net income per share - diluted
(f) $ 0.80
$ 0.57 $ 1.71 $ 1.10 Shares used in
calculating non-GAAP diluted net income per share 148,969
149,121 148,826 149,546
ITEMIZED
RECONCILIATION BETWEEN GAAP AND NON-GAAP NET INCOME: GAAP
net income $ 102,247 $ 46,605
$ 238,905 $ 106,582 Amortization of
acquired intangible assets 12,772 11,507 25,659 24,698 Non-cash
interest expense
(a) 10,227 9,143 20,415 18,165 Acquisition
related expense (gain), net
(b) 2,329 (225 ) (7,558 ) (1,238
) Headquarter relocation 1,480 2,892 2,179 3,487 Loss on
extinguishment of debt 233 31,360 233 31,360 Legal contingencies —
4,817 — 10,663 Contingent compensation expense
(c) — 496 —
3,336 Cost-method investment gain, net
(d) — — (12,582 ) —
Incremental non-GAAP tax expense
(e) (9,617 ) (22,025 )
(12,204 ) (32,436 ) Non-GAAP net income
(f) $ 119,671
$ 84,570 $ 255,047 $ 164,617
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP DILUTED NUMBER
OF SHARES: Weighted average shares used in calculation of GAAP
diluted net income per share 148,969 149,121 148,826 149,870
Weighted average dilutive potential common shares issuable of
redeemable convertible senior notes — — — (324
) Weighted average shares used in calculation of non-GAAP diluted
net income per share 148,969 149,121 148,826
149,546
(a) Non-cash interest expense is calculated in accordance
with the authoritative accounting guidance for convertible debt
instruments that may be settled in cash.
(b) Acquisition related expense (gain), net consists of
changes in fair value of contingent consideration and transaction
related costs.
(c) Contingent compensation expense relates to contingent
payments for post-combination services associated with prior period
acquisitions.
(d) Cost-method investment gain, net consists primarily
of a gain on the sale of an investment partially offset by
impairment charges on other investments.
(e) Incremental non-GAAP tax expense reflects the tax
impact related to the non-GAAP adjustments listed above.
(f) Non-GAAP net income and diluted net income per share
exclude the effect of the pro forma adjustments as detailed above.
Non-GAAP net income and diluted net income per share are key
drivers of the Company’s core operating performance and major
factors in management’s bonus compensation each year. Management
has excluded the effects of these items in these measures to assist
investors in analyzing and assessing our past and future core
operating performance.
Illumina, Inc. Results of Operations - Non-GAAP
(continued) (Dollars in thousands) (unaudited)
ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP RESULTS OF
OPERATIONS AS A PERCENT OF REVENUE: Three Months
Ended Six Months Ended June 28,
2015 June 29, 2014 June 28,
2015 June 29, 2014 GAAP gross
profit $ 376,365 69.8 %
$ 300,540 67.1 % $
751,392 69.7 % $ 578,832
66.7 % Stock-based compensation expense 2,579
0.5 % 2,433 0.6 % 5,190 0.5 % 4,813 0.5 % Amortization of acquired
intangible assets 11,384 2.1 % 9,545 2.1 % 22,769 2.1 % 19,080 2.2
% Legal contingencies — — 4,817 1.1 % —
— 10,663 1.2 % Non-GAAP gross profit
(a) $
390,328 72.4 % $ 317,335 70.9 % $ 779,351 72.3
% $ 613,388 70.6 %
GAAP research and development
expense $ 96,182 17.8 % $
82,985 18.5 % $ 187,954
17.4 % $ 160,026 18.4 %
Stock-based compensation expense (10,747 ) (2.0 )% (12,785 ) (2.8
)% (22,054 ) (2.0 )% (24,454 ) (2.8 )% Contingent compensation
expense
(b) — — (496 ) (0.1 )% — —
(580 ) (0.1 )% Non-GAAP research and development expense $
85,435 15.8 % $ 69,704 15.6 % $ 165,900 15.4 %
$ 134,992 15.5 %
GAAP selling, general and
administrative expense $ 124,441 23.1
% $ 114,649 25.6 % $
240,758 22.3 % $ 224,222
25.8 % Stock-based compensation expense (19,631 )
(3.6 )% (20,778 ) (4.6 )% (37,631 ) (3.5 )% (40,153 ) (4.7 )%
Amortization of acquired intangible assets (1,388 ) (0.3 )% (1,962
) (0.5 )% (2,890 ) (0.2 )% (5,618 ) (0.6 )% Contingent compensation
expense
(b) — — — — — —
(2,756 ) (0.3 )% Non-GAAP selling, general and
administrative expense $ 103,422 19.2 % $ 91,909 20.5
% $ 200,237 18.6 % $ 175,695 20.2 %
GAAP
operating profit $ 151,933 28.2 %
$ 100,239 22.4 % $
328,059 30.4 % $ 192,335
22.1 % Stock-based compensation expense 32,957 6.1 %
35,996 8.0 % 64,875 6.0 % 69,420 8.0 % Amortization of acquired
intangible assets 12,772 2.4 % 11,507 2.6 % 25,659 2.4 % 24,698 2.8
% Acquisition related expense (gain), net
(c) 2,329 0.4 %
(225 ) (0.1 )% (7,558 ) (0.7 )% (1,238 ) (0.1 )% Headquarter
relocation 1,480 0.3 % 2,892 0.7 % 2,179 0.2 % 3,487 0.5 % Legal
contingencies — — 4,817 1.1 % — — 10,663 1.2 % Contingent
compensation expense
(b) — — 496 0.1 %
— — 3,336 0.4 % Non-GAAP operating profit
(a) $ 201,471 37.4 % $ 155,722 34.8 % $
413,214 38.3 % $ 302,701 34.9 %
GAAP other
expense, net $ (10,761 ) (2.0
)% $ (39,773 ) (8.9 )%
$ (8,841 ) (0.8 )% $
(48,081 ) (5.5 )% Non-cash interest
expense
(d) 10,227 1.9 % 9,143 2.1 % 20,415 1.9 % 18,165 2.1
% Loss on extinguishment of debt 233 — 31,360 7.0 % 233 — 31,360
3.6 % Cost-method investment gain, net
(e) — —
— — (12,582 ) (1.2 )% — — Non-GAAP
other (expense) income, net
(a) $ (301 ) (0.1 )% $ 730
0.2 % $ (775 ) (0.1 )% $ 1,444 0.2 %
(a) Non-GAAP gross profit, included within non-GAAP
operating profit, is a key measure of the effectiveness and
efficiency of manufacturing processes, product mix and the average
selling prices of the Company’s products and services. Non-GAAP
operating profit, and non-GAAP other (expense) income, net, exclude
the effects of the pro forma adjustments as detailed above.
Management has excluded the effects of these items in these
measures to assist investors in analyzing and assessing past and
future core operating performance.
(b) Contingent compensation expense relates to contingent
payments for post-combination services associated with prior period
acquisitions.
(c) Acquisition related expense (gain), net consists of
changes in fair value of contingent consideration and transaction
related costs.
(d) Non-cash interest expense is calculated in accordance
with the authoritative accounting guidance for convertible debt
instruments that may be settled in cash.
(e) Cost-method investment gain, net consists primarily
of a gain on the sale of an investment partially offset by
impairment charges on other investments.
Illumina, Inc.Reconciliation of
Non-GAAP Financial Guidance
The Company’s future performance and financial results are
subject to risks and uncertainties, and actual results could differ
materially from the guidance set forth below. Some of the factors
that could affect the Company’s financial results are stated above
in this press release. More information on potential factors that
could affect the Company’s financial results is included from time
to time in the Company’s public reports filed with the Securities
and Exchange Commission, including the Company’s Form 10-K for the
fiscal year ended December 28, 2014, and the Company’s Form 10-Q
for the fiscal quarter ended March 29, 2015. The Company assumes no
obligation to update any forward-looking statements or
information.
Fiscal Year 2015 Diluted net income per share
Non-GAAP diluted net income per share $3.39 - $3.45 Amortization of
acquired intangible assets (0.21) Non-cash interest expense
(a) (0.17) Cost-method investment gain, net
(b) 0.06
Acquisition related gain, net
(c) 0.03 Headquarter
relocation
(d) (0.02)
GAAP diluted net income per
share $3.08 - $3.14
(a) Non-cash interest expense is calculated in accordance
with the authoritative accounting guidance for convertible debt
instruments that may be settled in cash.
(b) Cost-method investment gain, net consists primarily
of a gain on the sale of an investment partially offset by
impairment charges on other investments.
(c) Acquisition related gain, net consists of changes in
fair value of contingent consideration.
(d) Headquarter relocation represents accretion of
interest expense on lease exit liability and changes in estimate of
such liability.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150721006479/en/
Illumina, Inc.Investors:Rebecca Chambers,
858.255.5243rchambers@illumina.comorMedia:Eric Endicott,
858.882.6822pr@illumina.com
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